- Telsey Advisory Group analyst Joseph Feldman reiterated a Market Perform rating on the shares of Big Lots Inc (NYSE:BIG) with a price target of $20.00.
- In the near term, the analyst thinks Big Lots is being impacted by the challenging macro environment and high inflation that is hurting consumer spending on discretionary items.
- The company is addressing these trends by lowering price points across categories, including bringing down opening price points, expanding private brands, especially in lawn and garden, furniture, and home, and communicating value.
- The analyst expects the inflationary trend, especially in big-ticket furniture and home products, to continue into 1H 2023.
- The analyst further added that the pressure on profit would persist from supply chain costs and elevated markdowns.
- The near-term trends, the analyst feels, are masking the progress on the company's Operation North Star transformation strategy in merchandising, digital, loyalty, optimization of margins, enhancement of the supply chain infrastructure, and cost savings.
- In the long term, Feldman said the Operation North Star initiatives are expected to structurally transform the company and help restore profitability.
- The analyst thus prefers to stay on the sidelines, given the tough near-term trends and elevated pressure on profitability expected through 1H23.
- The analyst specified that Big Lots' value-focused furniture and home assortment and omni-channel capabilities should help attract customers in those markets and gain market share.
- Price Action: BIG shares are trading higher by 0.96% at $16.76 on the last check Monday.
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